JAMIA MILLIA ISLAMIA

Faculty of law

Project

Penal Provisions

Tax Law 2

Submitted to: Dr. Eakramuddin

Submitted by: (Arsalan Ahmad)

B.A.LL.B (Self-finance) 7th Semester

Batch: 2019 - 2020

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 Acknowledgement

In preparation of my assignment, I had to take the help and guidance of some respected persons,
who deserve my deepest gratitude. As the completion of this assignment gave me much pleasure,
I would like to show my gratitude , our Professor Dr. Eakramuddin at Faculty of Law, Jamia
Millia Islamia for giving me great guidelines for assignment throughout numerous consultations.
I would also like to expand my gratitude to all those who have directly and indirectly guided me
in writing this assignment. Many people, especially my classmates have made valuable comment
suggestions on my paper which gave me an inspiration to improve the quality of the assignment.

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Table of Content

Sr. No. Topic Pg.No.

1 Introduction 4

2 GST Returns 5

3 Anti – Profiteering 9

4 Refunds under GST 11

5 Demand and Recovery under GST 14

6 Offences and Penalties under GST 18

7 Conclusion 23

Introduction

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Income tax act and rules famed there under having provisions which required to be complied
with by an assessee and to be followed by the income tax department. Tax payers while
attempted for reducing tax burden either by making tax planning or by adopting tax evasion or
tax avoidance at the same time the income tax department tried to maximize the tax collection.

Default in complying with such provisions or conditions as prescribed under the Income-tax Act
would attract certain penalty and also in some cases prosecutions as well. There are three mode
built in the fiscal legislation for encouraging tax compliance:

a) Charge of Interest,

b) Imposition of penalty,

c) Launching of prosecution against tax delinquents.

While charging of interest is compensatory in nature due to delay in payment of taxes, the
imposition of penalty and institution of prosecution proceedings act as strong deterrents against
delinquent tax payers. Some of the penalties are mandatory and a few are at the discretion of the
tax authorities. In this article an attempt is made to consolidate the quantum of penalties that can
be imposed under the law.

GST Returns

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GST returns essentially stands for filing of all GST. Every individual who is covered under the
GST Act must produce their income to the Tax Department of India. This is known as return
and it includes details of every sale and purchase. Under this system of taxation, concerned
individuals must file their GST return 26 times in a year. While business owners have to go
for goods and services tax filing two times every month, they must also file two additional time
half-yearly. Before moving into the process of filing GST return, it is essential to understand a
few additional things .

Types of GST Returns

 

1. GSTR-1

GSTR-1 is the return to be furnished for reporting details of all outward supplies of goods and
services made, or in other words, sales transactions made during a tax period, and also for
reporting debit and credit notes issued. Any amendments to sales invoices made, even pertaining
to previous tax periods, should be reported in the GSTR-1 return.

GSTR-1 is to be filed by all normal taxpayers who are registered under GST. It is to be filed
monthly, except in the case of small taxpayers with turnover up to Rs.1.5 crore in the previous
financial year, who can file the same on a quarterly basis.

2. GSTR-2A

GSTR-2A is the return containing details of all inward supplies of goods and services i.e.
purchases made from registered suppliers during a tax period. The data is auto-populated based
on data filed by the suppliers in their GSTR-1 return. GSTR-2A is a read-only return and no
action can be taken.

3. GSTR-2

GSTR-2 is the return for reporting the inward supplies of goods and services i.e. the purchases
made during a tax period. The details in the GSTR-2 return are auto-populated from the GSTR-
2A. Unlike GSTR-2A, the GSTR-2 return can be edited.

GSTR-2 is to be filed by all normal taxpayers registered under GST, however, the filing of the
same has been suspended ever since the inception of GST.

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4. GSTR-3

GSTR-3 is a monthly summary return for furnishing summarized details of all outward supplies
made, inward supplies received and input tax credit claimed, along with details of the tax
liability and taxes paid. This return is auto-generated on the basis of the GSTR-1 and GSTR-2
returns filed.

GSTR-3 is to be filed by all normal taxpayers registered under GST, however, the filing of the
same has been suspended ever since the inception of GST.

5. GSTR-3B

GSTR-3B is a monthly self-declaration to be filed, for furnishing summarized details of all

outward supplies made, input tax credit claimed, tax liability ascertained and taxes paid.

GSTR-3B is to be filed by all normal taxpayers registered under GST.

6. GSTR-4 / CMP-08

GSTR-4 is the return that was to be filed by taxpayers who have opted for the Composition
Scheme under GST. CMP-08 is the return which has replaced the now erstwhile GSTR-4. The
Composition Scheme is a scheme in which taxpayers with turnover up to Rs.1.5 crores can opt
into and pay taxes at a fixed rate on the turnover declared.

The CMP-08 return is to be filed on a quarterly basis.

7. GSTR-5

GSTR-5 is the return to be filed by non-resident foreign taxpayers, who are registered under GST
and carry out business transactions in India. The return contains details of all outward supplies
made, inward supplies received, credit/debit notes, tax liability and taxes paid.

The GSTR-5 return is to be filed monthly for each month that the taxpayer is registered under
GST in India.

8. GSTR-6

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GSTR-6 is a monthly return to be filed by an Input Service Distributor (ISD). It will contain
details of input tax credit received and distributed by the ISD. It will further contain details of all
documents issued for the distribution of input credit and the manner of distribution.

9. GSTR-7

GSTR-7 is a monthly return to be filed by persons required to deduct TDS (Tax deducted at
source) under GST. GSTR 7 will contain details of TDS deducted, the TDS liability payable and
paid and TDS refund claimed, if any.

10. GSTR-8

GSTR-8 is a monthly return to be filed by e-commerce operators registered under the GST who
are required to collect tax at source (TCS). GSTR-8 will contain details of all supplies made
through the E-commerce platform, and the TCS collected on the same.

The GSTR-8 return is to be filed on a monthly basis.

11. GSTR-9

GSTR-9 is the annual return to be filed by taxpayers registered under GST. It will contain details
of all outward supplies made, inward supplies received during the relevant previous year under
different tax heads i.e. CGST, SGST & IGST and HSN codes, along with details of taxes payable
and paid. It is a consolidation of all the monthly or quarterly returns (GSTR-1, GSTR-2A,
GSTR-3B) filed during that year. 

GSTR-9 is required to be filed by all taxpayers registered under GST*, except taxpayers who
have opted for the Composition Scheme, Casual Taxable Persons, Input Service Distributors,
Non-resident Taxable Persons and persons paying TDS under section 51 of CGST Act.

*As per the CBIC notification 47/2019, the annual return under GST for taxpayers having an
aggregate turnover which does not exceed Rs.2 crore has been made optional for FY 2017-18
and FY 2018-19.

12. GSTR-9A

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GSTR-9A is the annual return to be filed by taxpayers who have registered under the
Composition Scheme in a financial year*. It is a consolidation of all the quarterly returns filed
during that financial year.

*GSTR-9A filing for Composition taxpayers has been waived off for FY 2017-18 and FY 2018-
19 as per the decision taken in the 27th GST Council meeting.

13. GSTR-9C

GSTR-9C is the reconciliation statement to be filed by all taxpayers registered under GST whose
turnover exceeds Rs.2 crore in a financial year. The registered person has to get their books of
accounts audited by a Chartered/Cost Accountant. The statement of reconciliation is between
these audited financial statements of the taxpayer and the annual return GSTR-9 that has been
filed.

GSTR-9C is to be filed for every GSTIN, hence, one PAN can have multiple GSTR-9C forms
being filed.

As per the CBIC notification 16/2020, GSTR-9C is waived off for the taxpayers with an
aggregate turnover of more than Rs 5 crore for the financial year 2018-19.

14. GSTR-10

GSTR-10 is to be filed by a taxable person whose registered has been cancelled or surrendered.
This return is also called a final return and has to be filed within 3 months from the date of
cancellation or cancellation order, whichever is earlier.

15. GSTR-11

GSTR-11 is the return to be filed by persons who have been issued a Unique Identity
Number(UIN) in order to get a refund under GST for the goods and services purchased by them
in India. UIN is a classification made for foreign diplomatic missions and embassies not liable to
tax in India, for the purpose of getting a refund of taxes. GSTR-11 will contain details of inward
supplies received and refund claimed1.

Anti – Profiteering
1
V. S. Datey: Indirect Taxes Law and Practice, Taxmann Publications, New Delhi.

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The GST Council announced the anti-profiteering rules on 18th June 2016.

Anti-profiteering rules are needed as lessons learnt from other countries show that there has been
inflation and prices have increased after GST implementation. For example, Singapore saw a
hike in inflation when it introduced GST in 1994. It makes it more important for Indian
administrators to keep tabs on prices after the implementation of GST. India is doing what many
countries did: initiate anti-profiteering measures at the retail level to protect consumers from
price swindling

Clause 171 has been inserted in the GST Act which provides that it is mandatory to pass on the
benefit due to the reduction in the rate of tax or from input tax credit to the consumer by way of
commensurate reduction in prices.

Section 171(1) casts responsibility to pass on the benefit of GST to the recipient for following
two aspects:

Reduction of Tax Rate in New Tax Regime

For example, eating out has become cheaper under GST (mostly 18% GST as compared to
earlier 20.5%). This benefit must be passed on to the consumers.

Passing of benefit due to reduction of tax rate, in case of supplies exclusive of tax or for
immediate services is not a big challenge. This is because the reduction in tax rate will directly
be evidenced by invoices, and the recipient will get benefit of the rate reduction. Such can be
seen now in the cases of eating out and travelling through app-based taxis (reduced by 1%).

However, in case where contract of supplies is inclusive of taxes, this provision will cast
responsibility on the supplier to reduce the price due to reduction in rate of taxes.

For example, FMCG items are normally sold on MRP basis or some other fixed prices by
retailers. If there is any reduction in rate of tax it has to be passed on to the ultimate recipient.
Accordingly, there will be a need to revise MRP or other prices fixed for such supplies.2

2
V. S. Datey: Indirect Taxes Law and Practice, Taxmann Publications, New Delhi.

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However, if GST has a negative impact on the cost, then prices can be increased. For example: If
the output supply was zero-rated in previous regime and also remains zero-rated in GST regime,
the business will not get any input tax credit.

If the tax rates are increased, tax under reverse charge imposed etc. then prices will increase.

For example, domestic LPG was exempt from tax under earlier regime. Now they fall under 5%
GST. This will result in an increase in the prices of cooking gas.

Benefit of Input Tax Credit

Almost all industries will be affected with respect to passing of benefit due to better credit chain.
In most places, be it service sector, manufacturing, trading, or any specific industry, all are going
to get advantage of better flow of input tax credit except sectors having zero-rated output supply.
So overall the expectations of anti-profiteering provisions are commensurate reduction in prices
of supplies.

For example, radio taxis earlier could not adjust the input VAT on office supplies with the output
service tax payable. Now, ITC on all inputs can be adjusted against output tax. These benefits are
passed on by them in the form of offers and discounts. Similarly, many big stores have GST
sales and special offers to pass on the benefit.

Refunds under GST

Timely refund mechanism is essential in tax administration, as it facilitates trade through the
release of blocked funds for working capital, expansion and modernisation of existing business.
The provisions pertaining to refund contained in the GST law aim to streamline and standardise

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the refund procedures under GST regime. Thus, under the GST regime, there will be a
standardised form for making any claim for refunds. The claim and sanctioning procedure will
be completely online and time bound, which is a marked departure from the existing time
consuming and cumbersome procedure. Situations Leading to Refund Claims The relevant date
provision embodied in Section 54 of the WBGST Act, 2017, provision contained in Section 77
of the WBGST Act, 2017 and the requirement of submission of relevant documents as listed in
Rule 1(2) of Refund Rules is an indicator of the various situations that may necessitate a refund
claim. A claim for refund may arise on account of:

1. Export of goods or services

2. Supplies to SEZs units and developers

3. Deemed exports

4. Refund of taxes on purchase made by UN or embassies etc.

5. Refund arising on account of judgment, decree, order or direction of the Appellate Authority,
Appellate Tribunal or any court

6. Refund of accumulated Input Tax Credit on account of inverted duty structure

7. Finalisation of provisional assessment

8. Refund of pre-deposit

9. Excess payment due to mistake

10. Refunds to International tourists of GST paid on goods in India and carried abroad at the time
of their departure from India

11. Refund on account of issuance of refund vouchers for taxes paid on advances against which,
goods or services have not been supplied

12. Refund of CGST & WBGST paid by treating the supply as intra-State supply which is
subsequently held as inter-State supply and vice versa

Thus, practically every situation is covered. The GST law requires that every claim for refund is
to be filed within 2 years from the relevant date3.

3
V.S Datey: GST Ready Reckoner, Taxmann Publications, New Delhi

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Treatment for Zero Rated Supplies

One of the major categories under which, claim for refund may arise would be, on account of
exports. All exports (whether of goods or services) as well as supplies to SEZs have been
categorised as Zero Rated Supplies in the IGST Act. “Zero rated supply” under Section 16 of the
IGST Act, 2017 means any of the following supplies of goods or services or both, namely:

(a) export of goods or services or both; or

(b) supply of goods or services or both to a Special Economic Zone developer or a Special
Economic Zone unit.

On account of zero rating of supplies, the supplier will be entitled to claim input tax credit in
respect of goods or services or both used for such supplies even though they might be nontaxable
or even exempt supplies. Every person making claim of refund on account of zero rated supplies
has two options. Either he can export under Bond/LUT and claim refund of accumulated Input
Tax Credit or he may export on payment of integrated tax and claim refund of thereof as per the
provisions of Section 54 of WBGST Act, 2017. Thus, the GST law allows the flexibility to the
exporter (which, will include the supplier making supplies to SEZ) to claim refund upfront as
integrated tax (by making supplies on payment of tax using ITC) or export without payment of
tax by executing a Bond/LUT and claim refund of related ITC of taxes paid on inputs and input
services used in making zero rated supplies.

Grant of Provisional Refund in Case of Zero Rated Supplies

GST law also provides for grant of provisional refund of 90% of the total refund claim, in case
the claim relates for refund arising on account of zero rated supplies. The provisional refund
would be paid within 7 days after giving the acknowledgement. The acknowledgement of refund
application is normally issued within a period of 14 days but in case of refund of integrated tax
paid on zero rated supplies, the acknowledgement would be issued within a period of three days.
The provisional refund would not be granted to such supplier who was, during any period of five
years immediately preceding the refund period, was prosecuted.

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Standardisation of Procedure

The GST laws makes standardised provisions for making a refund claim. Every claim has to be
filed online in a standardised form which will be acknowledged (if complete in all aspects) in 14
days. The claim for refund of amount lying in the credit balance of the cash ledger can be made
in the monthly returns also. The Proper Officer has to convey deficiencies if any in the refund
claim within 14 days and in such cases the claim will be sent back to the applicant along with the
notified deficiencies, and the applicant can file the refund claim again after making goods the
deficiencies. No deficiency memos can be raised after the mandatory 14 day period. The claim, if
in order, has to be sanctioned within a period of 60 days from the date of receipt of the claim. If
this mandatory period is exceeded, interest will become payable along with refund from the
expiry of 60 days till the date of payment of refund (rate of interest has been recommended as
6% and 9% under the provisions of Section 56 of the WBGST Act, 2017 by the GST Council in
its meeting held on 18th and 19th May, 2017). However, if the refund claim is on account of pre-
deposit made before any appellate authority, the interest becomes payable from the date of
making such payment.4

Power with the Commissioner to Withhold Refund in Certain Cases

GST law provides that where an order giving rise to a refund is the subject matter of an appeal or
further proceedings or where any other proceedings under this Act is pending and the
Commissioner is of the opinion that grant of such refund is likely to adversely affect the revenue
in the said appeal or other proceedings on account of malfeasance or fraud committed, he may,
after giving the taxable person an opportunity of being heard, withhold the refund till such time
as he may determine. But it has been adequately safeguarded by provision for payment of
interest @ 9% if, as a result of appeal, or further proceedings, the applicant becomes eligible for
refund.

In sum, the law envisages a simplified, time bound and technology driven refund procedure with
minimal human interface between the taxpayer and tax authorities.

Demand and Recovery under GST

4
V.S Datey: GST Ready Reckoner, Taxmann Publications, New Delhi.

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Demand means the wish or desire of a consumer to get or acquire goods or services. When there
will be more demands, the market will flourish. It is an action that leads to the growth of the
economy. The government imposes a tax on every goods and service. Every person is liable to
pay the tax to the Government when they purchase the goods. When a person fails to oblige with
his duty, the Government has to recover the tax from the defaulter. Tax is the basic source for the
Government to run the economy of the country failing in which causes the economic imbalances.
The government adopts strict measures to recover the tax from the defaulters. 5

Issuance of Demand Notice 

Demand notice is a notice which is sent by the authority under Goods and Service Tax (GST) to
communicate its taxpayers.

Section 73:- Determining the tax which is Short or Not Paid or Refunded Erroneously

Section 73 of Central Goods and Services Tax (CGST) Act, 2017, deals with the determination
of those taxes which are short paid or not paid or which is erroneously refunded

When any tax has been short paid by the assessee or has not been paid or refunded erroneously
and where Input Tax Credit has been wrongly utilized or availed  for any of the reason which
does not include reason of any wilful-misstatement or fraud or any suppression of tax due to its
evasion and it comes to the notice of the proper officer, he will send him a notice to show cause
why he should not pay the amount of tax mentioned in the notice along with the interest. He will
also state the assessee to pay the penalty which is levy upon him. 

Time Period: The notice served by the proper officer shall be served three months before the
issuance of an order under sub-section (10) of Section 73.

Section 74:-  Determining the Tax which is Short or Not Paid or Refunded Erroneously and
Input Tax Credit has been availed due to Fraud, Wilful-misstatement or Suppression of
Facts

5
Dr. V. K. Singhania: Students Guide to GST & Customs Law, Taxmann Publications Pvt. Ltd., New Delhi.

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Section 74 of Central Goods and Services Tax (CGST) Act, 2017,  deal with the determination of
those taxes which are short paid or not paid or which is erroneously refunded and Input Tax
Credit has been wrongly utilized or availed for any of the reasons which include wilful-
misstatement or fraud, etc.

When any tax has been short paid by the assessee or has not been paid or refunded erroneously
and where Input Tax Credit has been wrongly utilized or availed  for any of the reasons which
include wilful-misstatement or fraud or any suppression of tax due to its evasion and it comes to
the notice of the proper officer, he will send a notice to the person has wrongly utilised or availed
the Input Tax Credit to show cause why he should not pay the amount of tax mentioned in the
notice along with the interest. He will also state the assessee to pay a penalty equal to the tax
which is levy upon him in the notice.

Time Period: The notice served by the proper officer shall be served six months before the
issuance of an order under sub-section (10) of Section 73.

Section 75: General Provisions regarding Determination of Tax

Section 75 of the Central Goods and Services Tax Act, 2017, deals with the provisions regarding
the determination of tax.

When Appellate Court stays the issuance of the notice or order by the public officer, for
computing the limitation period under Section 73(2) and Section 73(10)or Section 74(2)
and Section 74(10), the period till the issuance of notice or order are under stay shall be
excluded.

When the charges under Section 74(1)  relating to the willful misstatement or fraud or
suppression of facts to escape the tax did not establish against the person to whom notice has
been issued by the public officer in the Appellate Court or Tribunal and the court will remove
those charges, the notice shall be treated as a notice under Section 73(1).

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When Appellant Court or Tribunal passes any direction and an order is required to pass in
relation to that direction then such order shall be passed within two years from the date when the
direction was one communicated.

When any adverse decision is pronounced against the person liable for tax or penalty or where he
gives in writing, an authority may provide him with an opportunity of being heard. And if he
shows sufficient cause to satisfy the proper officer, his hearing may be adjourned or time may
granted to him.

Section 76:- Tax which is collected but not paid to the Government

Section 76 of the Central Goods and Services Tax (CGST) Act, 2017, deals with the taxes which
are collected by a person but not paid to the Government.

If a person collects from any other person the amount of tax and has not paid it to the
Government have to pay the amount of tax to the Government irrespective of the fact that the
goods or services upon which the tax was collected are taxable or not.

If any person, who is liable to pay the tax to the Government fails to do so, then the proper
officer may serve a notice to that person asking him to show cause why he should not pay the
amount as mentioned in the notice and why he should not pay a penalty equal to the amount
mentioned in the notice.The person will pay the amount after the due amount shall be determined
by the proper officer after his representation. Following the principle of Natural Justice, the
opportunity of being heard shall be provided to the person by the proper officer on his requests in
writing.

Section 81: When Transfer of Property is considered to be Void 

Section 81 of Central Goods and Services Tax Act, 2017, deals with-

If a person with an intention to defraud the Government revenue transfers his property by means
of sale, exchange, mortgage or by any other way or creates charge upon the property, such

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transfer of property by any mode or creation of charge shall be considered as a void against the
claim in relation to the tax payable by that person.

Exception: when the transfer of property and creation of charge is done due to the reason as
follows, it shall not be considered as void –

1. Good Faith
2. Without knowledge of the pendency of proceedings.
3. When previous permission has been taken from the proper officer.
4. Without any knowledge that a liability has been imposed upon him to pay the tax.

Section 82: Tax to be Charge on Property

Section 82 of Central Goods and Services Tax Act, 2017, says that-

When a person is required to pay the tax, penalty or interest to the Government, it shall be the
first charge on the property of the person liable to pay the tax. Nothing in this Section shall affect
the provisions given in Insolvency and Bankruptcy Code, 2016. 

Section 83: Provisional Attachment to the Property

Section 83 of the Central Goods and Services Tax Act, 2017, deals with the attachment of
property provisionally.

If the commissioner is of the opinion that the property of the taxpayer must be attached
provisionally including bank accounts to protect the interests of the Government revenue, he may
order in writing to attach the property provisionally. This order shall be given by the
Commissioner when the proceeding under Section 62 or Section 63 or Section 64 or Section 67
or Section 73 or Section 74 is pending.6

6
Dr. V. K. Singhania: Students Guide to GST & Customs Law, Taxmann Publications Pvt. Ltd., New Delhi.

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Offences and Penalties under GST

There are 21 offences under GST.

Fake/wrong invoices

1. A taxable person supplies any goods/services without any invoice or issues a false
invoice.
2. He issues any invoice or bill without supply of goods/services in violation of the
provisions of GST
3. He issues invoices using the identification number of another bonafide taxable person

Fraud

4. He submits false information while registering under GST

5. He submits fake financial records/documents or files fake returns to evade tax
6. Does not provide information/gives false information during proceedings

Tax evasion

7. He collects any GST but does not submit it to the government within 3 months
8. Even if he collects any GST in contravention of provisions, he still has to deposit it to the
government within 3 months. Failure to do so will be an offence under GST.
9. He obtains refund of any CGST/SGST by fraud.
10. He takes and/or utilizes input tax credit without actual receipt of goods and/or services
11. He deliberately suppresses his sales to evade tax

Supply/transport of goods

12. He transports goods without proper documents

13. Supplies/transports goods which he knows will be confiscated
14. Destroys/tampers goods which have been seized

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Others

15. He has not registered under GST although he is required to by law

16. He does not deduct TDS or deducts less amount where applicable.
17. He does not collect TCS or collects less amount where applicable.
18. Being an Input Service Distributor, he takes or distributes input tax credit in violation of
the rules
19. He obstructs the proper officer during his duty (for example, he hinders the officer
during the audit by tax authorities)
20. He does not maintain all the books that he required to maintain by law
21. He destroys any evidence

Common Offences under GST And Their Penalties

 

Type of offence Amount of penalty

Penalty for delay in filing Late fee is Rs. 100 per day per Act. So it is 100 under CGST &
GSTR 100 under SGST. Total will be Rs. 200/day. Maximum is Rs.
5,000. There is no late fee on IGST.

Penalty for not filing Penalty 10% of tax due or Rs. 10,000
GSTR
   -whichever is higher

Penalty for committing a Penalty 100% of tax due or Rs. 10,000

fraud
   -whichever is higher

(High value fraud cases also have jail term)

Penalty for helping a  Penalty extending upto Rs. 25,000

person to commit fraud

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 Penalty for opting for Demand & recovery provisions of sections 73 & 74 will apply.
composition scheme even
though he is not eligible  Fraud case

Penalty 100% of tax due or Rs. 10,000

   -whichever is higher

 Non-fraud case

Penalty 10% of tax due or Rs. 10,000

   -whichever is higher

Penalty for wrongfully Penalty 100% of tax due or Rs. 10,000

charging GST rate—
   -whichever is higher
charging higher rate
(if the additional GST collected is not submitted with the govt)

Penalty for not issuing Penalty 100% of tax due or Rs. 10,000
invoice
   -whichever is higher

Penalty for not registering Penalty 100% of tax due or Rs. 10,000
under GST
   -whichever is higher

Penalty for incorrect Penalty of Rs. 25,000

invoicing

Situations where there is no penalty (but interest may apply)

Type of offence Action

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 Penalty for incorrect type of GST charged No penalty. Pay the correct GST and get refund
(IGST instead of CGST/SGST) of the wrong type of GST paid earlier

Penalty for incorrect filing of GSTR No penalty. But interest @18% on shortfall
amount

Penalty for delay in payment of invoice. ITC will be reversed if not paid within 6
months.
 
No penalty as such

Penalty for wrongfully charging GST rate Interest @18% applicable on the shortfall
— charging lower rate

Jail punishments

GST has corporal punishments (jail) for high value fraud cases as follows-

Tax amount involved 100-200 lakhs 200-500 lakhs Above 500 lakhs

Jail term Upto 1 year Upto 3 years Upto 5 year

Fine In all three cases

Minor Breaches under GST

 Minor breaches (where tax amount is less than Rs.5000) or errors are easily rectifiable and
clearly made without any motive of fraud.

There will not be substantial penalties for minor breaches

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The tax authority may issue a warning in such cases.

This will be beneficial to businesses, especially SMEs, who may make genuine mistakes
especially in the first few months of GST implementation. Being penalized for genuine errors
will be a hard blow to the SMEs who do not have as many resources as the larger organizations
to adapt to GST.

General Rules Regarding Penalty

These rules of penalty are generally the same in all laws whether tax laws or contract law or any
other law.

 Every taxable person, on whom the penalty is imposed, will be served with a show cause
notice first and will have a reasonable opportunity of being heard.
 The tax authority will give an explanation regarding the reason for penalty and the nature
of offence
 When any person who voluntarily discloses a breach of law, the tax authority may use
this fact to reduce the penalty

Conclusion

The goods and services tax (GST) is a value-added tax levied on most goods and services sold
for domestic consumption. The GST is paid by consumers, but it is remitted to the government
by the businesses selling the goods and services. The goods and services tax (GST) is an indirect
federal sales tax that is applied to the cost of certain goods and services. The business adds the
GST to the price of the product, and a customer who buys the product pays the sales price
inclusive of the GST. 

India established a dual GST structure in 2017, which was the biggest reform in the country's tax
structure in decades. The main objective of incorporating the GST was to eliminate tax on tax,
or double taxation, which cascades from the manufacturing level to the consumption level.

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From above assignment we can conclude that, there are several provisions to penalize the wrog
doer, who doesnot pay the tax money.

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